Next Generation of Invoice & Receivables
Next Generation Invoice & Receivables panel with Jed Simon, CEO of FastPay; Bertram Meyer, CEO of Taulia; George Shapiro, CEO & Chairman of The Interface Financial Group; Kevin Daniels, Chief Product Officer of C2FO; Krista Morgan, CEO of P2Binvestor; Eyal Shinar, CEO & Founder of Fundbox; and moderator Matt Harris, Managing Director of Bain Capital Ventures, at LendIt USA 2015.
These companies create a marketplace to provide short term financing for small to medium sized businesses. These Borrowers have a revenue stream provided by their invoices. The lenders have several approaches to evaluating credit worthiness and securing their risk.
Typically, these lenders can create a short term loan or asset class that takes 60 to 90 days to turnover. It was noted by Krista Morgan, that this short time scale protects them from interest rate and currency volatility. Those last two factors complicate much of lending ; think of carry trading.
These companies can arrange relatively quick web centric loans with 3 main models. 1. Factoring, where an invoice is legally signed over to, and will be directly paid to a lender. These online lenders will arrange credit to a business in need of money by arranging or directly purchasing an accounts receivable or invoice from the lendee and giving them cash in advance. For example, the shoelace supplier for Nike is short on cash, they have an order that will be paid by a fortune 500 company in 1 months time. The lender can arrange money by creating a marketplace for these loans or directly purchasing them on their book. 2. Securitized loans directly from lenders to a company, with the invoice acting as a security or collateral, but is not actually signed over to the lender. Eyal Shinar from Fundbox sees little value in securitization 3. Unsecuritized loans directly to a company. George Shapiro from Interface Financial thinks it essential. He focuses on other measures of creditworthiness and thinks the hold ups and barriers of securitization overweigh the benefits.
The difference in spot versus contract pricing and lender acquisition was a question brought up by the moderator with each panelist having bespoke tools to determine this along with techniques for acquiring customers. Krista Morgan from P2Binvestor has found a few verticals she likes. She has tried to focus in on the fact that it is easier to get a new natural food company, if they have done 3 natural food companies. Similarly she found that teaching sophisticated businesses companies how to factor and deal with receivables may be made easier when using P2P than a bank because of the seamless and rapid response their less regulated format allows.
Bertram Meyer focuses in on the 9 month sale cycle for the largest companies and the advantages that come with interfacing with the billing and ERP system of large companies. This close cooperation allowed his company to provide finance for the billion dollar supply chains these fortune 100 companies require.